Interest Rate

You are here:
< Back

L1: Interest RateI’m setting up a 72t plan for my IRA, but not sure what interest rate should I assume. Can I assumre any interest rate higher than 120% mid-term rate? What is the rule for the upper limit on rate?2002-04-18 13:10, By: sonny, IP: [127.0.0.1]
L2: RE: Interest RateThe is no rule for the upper limit that can be used. However, if you use anything higher than 120% of the Long-term AFR for the month in which the first payment occurs, you may want to get your own PLR. If the IRS buys it, it is safe to use.Check out the interest rate link on the left. “Reasonable” leaves a lot of room – both on your side to go for a higher rate and for the IRS to ok a lower rate.2002-04-18 13:48, By: Gfw, IP: [127.0.0.1]

L2: RE: Interest RateFor April, 2002; 120% of LT/AFR is 6.76%; not an absolute low but darned near it. As usual, the IRS does not give us any concrete guidance on upper interest rate limits other than to say any rate up to 120% of MT/AFR is fine. Going beyond that limit places in the taxpayer in a grey area of uncertainty. In this arena, I am of the opinion (and I am admittedly a little more aggressive than Gfw) that alot of factors need to be taken into consideration when setting an interest rate including: method, age of recepient, fixed methology versus annual recalculation, as well as other plan features. Now, assuming you go past the 6.75% mark; what should you do? In this regard you have three choices: (1) self-insure your plan so to speak; (2) seek out the formal advice/opinion of a CPA/Tax attorney that insures all of your plan features are in compliance; (3) get your own private letter ruling from the IRS.If you would like some help on this issue, feel free to drop me a note @ wjstecker@wispertel.net.TheBadger2002-04-18 15:35, By: TheBadger, IP: [127.0.0.1]